Borrowing Money: Understanding How Personal Loans Work

Finance and the finance system is one of the most complex and difficult things to understand in our society, but it is also one of the most important. Money is one of the most important things in our society as it determines so much about our lives and people work 40+ hours a week to make sure that they have enough money. It determines what our quality of life is like, if people have a lot of money, they tend to have less stress and their quality of life is higher as they can afford luxuries such as holidays, clothes, and cars. If people don’t have much money they tend to be more stressed as not only can they not afford the luxuries that help to improve quality of life, but often they can’t even afford basic necessities like their rent, food, and heating. As money is so important, this makes anything to do with finance important, but often people struggle to understand the finance system as many people aren’t good with numbers. The finance system covers everything from how national banks work and how they operate to control things such as the inflation rate, to how to make the best investments to diversify your investment portfolio to how loans and borrowing money works. If you’re in a position where you need to borrow money, whether this is to invest it to make more money or it’s to make ends meet, we’ve found all the information you’ll need to understand how personal loans work.

What is a loan?

A loan in some circumstances is very useful, it is a commitment between two parties, usually a company/individual and a bank or loan company. In this agreement one party will lend the other party an agreed amount of money, A loan is beneficial to both parties as the company or individual may have no other way to acquire capital so this is helpful to them and, loans are paid back with an interest rate which benefits the lender as they’re making money.

How interest rates work

Interest rates are always changing and they’re really important as if you have a high-interest rate on your loan it can become difficult for you to pay it back. An interest rate is attached to the loan and is written clearly in any loan agreement that both party’s sign. There is a simple interest which means each monthly repayment will be the same as it will be a percentage of the whole loan or compound interest which means it will be a certain percentage of how much is still owed of the loan. Interest rates are determined by many different factors and some loan agreements state that the interest rate is subject to change over the length of the loan agreement.

Different loan types

There are many different types of loans available out there for people or businesses to borrow. A personal loan is one type of loan and in its simplest terms is a payday loan that is guaranteed. These loans on average are paid back over 12 months but can be paid back for as long as 84 months in some cases. Some other types of loans include credit card loans, which act as an overdraft, student loans which can only be used to pay college fees, car loans which are used if you’re wanting to buy a car on finance and small business loans which are an incentive to help small companies as it is difficult to start up a small company.

What is loan collateral?

Loan collateral is something that is used to protect the lender when 2 parties agree to a loan agreement. As there is no guarantee that the borrower will ever pay back the money, the lender can take assets such as houses or cars as loan collateral as both an incentive for the borrower to pay the money back and as protection for if they don’t. If the loan is not paid back, the investor can seize the asset is as a way to get back some of their lost money.

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All the Reasons you Should Get your CFA Charter in 2021

For those of you that are not already aware of what a CFA charter is, it is basically a very well-developed qualification that is one of the hardest that a business and finance graduate can get. Although this qualification may be one of the hardest out there, it is definitely worth it if you are able to get it and achieve a high grade within the examinations. For somebody who is unsure of what they want to do after they graduate this qualification would be a good option as it is something that is best worked on when you have no other big responsibilities in your life as the research and preparation process for the exams will take up a lot of your time. 

 

There are many reasons in favor of your getting this qualification however, I would highly recommend that you do plenty of research into what you will have to do to achieve this as it is one of the exams with the biggest worldwide failure rate ever. With this in mind, there is plenty for you to consider and I would recommend that you take a realistic approach when thinking about taking your CFA charter.  

 

Experience

One of the biggest reasons that you should consider getting your CFA charter would be the experience that it provides, with so many people doing badly on the exam and its recognisability as being one of the most difficult qualifications you can get, the experience that is provided by even attempting to get this qualification is going to be something that you cannot get anywhere else. Even if you are not as successful with it as you once thought you would be, the fact that you are putting in the effort to revise and attempt the assessment will provide you with a  lot of unique experience that many others in the industry do not have. 

 

Having this experience is all going to help you with putting together a solid CV with plenty of different things to talk about in any potential job interviews you have coming up. With any attempts at this qualification, you are not only showing that you are skilled enough to attempt such a big exam but also that you care enough about your progression in finance and business to give it a go, which is both great qualities when looking for employment.  

 

Research

As mentioned previously this qualification is not easy to get, you will need to ensure that you have saved yourself plenty of time to go over everything that you have learned during your previous studies, as well as ensuring that you purchase the relevant study guides and stick to a hardcore revision schedule up until the date of your cfa level 1 mock exam, even the mock exam will require you to do a lot of preliminary research and it is a great thing to do to establish where you are at with your studies and looking for any areas that need improvements.  

 

Sticking to a large research and revision schedule is very important for you to do well on the exam, but even if you do not do well you will still be extremely well versed in finance and business management based upon the work you have done. This is why it is so beneficial to even give the CFA charter a go as the work you put in towards the qualification is going to be very useful later in life and help make you stand out when employers are comparing your CV with other graduates.  

 

Recognisability

Another reason why you should definitely look at getting your CFA charter this year would be because it is so recognizable within the industry, when you finish your official studies and graduate it can be hard to know what to do. Taking the time to revise and complete your CFA charter is something that you can do which will further your career as well as making sure that you are not wasting your time by doing things that are not as beneficial for you. If you have on your CV that you have even attempted the charter it shows that you care about going further and getting extra qualifications within the industry.  

The business and finance world is one that is filled with hopeful graduates every year, as the course is so popular this means that there is a lot of competition against you in terms of finding work in the sector that you want to work within. Having such big qualifications like this will make you stand out completely from the crowd and for those of you that are unsure about the employment after education process, having another few months to figure things out could be just what you need.  

 

Management

If you are able to secure your CFA charter it is likely that you are a very advanced candidate for higher-paying work within the industry, the fact that you are able to complete and achieve a good grade within this exam shows that you have the potential for positions like manager within a finance company. It is no small feat to complete this charter with a good grade so don’t downplay your success by going for a lower-ranking position. Employers will appreciate your authority and skill and it is likely that you will get the job you desire.  

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The Most Financially Competitive Cities in the UK

If you’re thinking of starting a finance business then one of the toughest decisions to make is where to set it up. A popular choice of country to set up a finance company is the United Kingdom. The United Kingdom has a strong economy which is vital to ensuring the long-term success of your business and they have a massive financial industry. The finance sector in the UK is one of the best in the world, it is estimated that this sector brings in upwards of £130 billion and is a huge 7% of the country’s total economic output. This makes it a great environment to start up a finance business, there are many successful finance companies in the UK, they have been given the title of the finance capital of Europe which is huge considering how great Germany and France’s finance sectors are. The city you choose within the UK will also massively impact how well your business does, starting your business in a city, not a town is obviously the way to go but deciding what city can be difficult. To save you from doing lots of research we’ve found the most financially competitive cities in the UK for you. 

 

London

London is the capital city of England and it is one of the busiest cities in the world and is a massively popular tourist destination. This is a city that has a reputation on the global stage and is almost as competitive as places like New York and Tokyo. There are two major financial districts in London: The City of London and Canary Wharf.  Whilst both are internationally recognized as important and successful finance districts The City of London is slightly more important as it is home to the Bank of England and the Stock Exchange, both of which are extremely important in the finance sector. Another great thing about London is that it is in a great location, whilst London will likely have everything you need to run a business, if you set your company up in London, you’ll be able to take advantage of services being offered in other cities and towns close to London. For example, one of the most important things to help improve a business’s chance of success is to make sure that you’re using up-to-date technology. If you’re not tech-savvy then you’ll have to pay someone else to take care of your tech needs. If you set up your business in London then you’ll be able to access a Watford based IT support company as they’re known to provide some of the best services in the whole of the UK. However, rent prices in London are extremely high as is the cost of living so if it’s too expensive for you to set your business up in London, there are other great cities too. 

Manchester

Manchester is another major city in the UK, it is one of the most popular cities in the UK as it is filled with great culture and is one of the biggest northern cities. As it is located in the North this means that everything you need for your business will be much cheaper and rent would be significantly lower than it would be in London. Their major financial district is called Spinning fields, this has seen a lot of growth over the last decade, there are now double the number of workers there than there was ten years ago. Many big companies are choosing to start up in Manchester instead of London and Manchester is predicted to be the home of FinTech in the UK which is the future of finance. More graduates than ever before are also choosing to stay in or move to Manchester as an alternative to London, this will help the cities financial sector to continue to grow. 

Edinburgh

Edinburgh is the capital of Scotland and is another major city in the UK. It is one of the 2 biggest cities in Scotland and is home to over 50% of Scotland’s whole financial sector. Edinburgh has the 2nd biggest financial district in the Uk, second only to the City of London. This is another city that is recognized on an international level as they have the 4th largest financial sector in Europe. This is another city where lots of FinTech companies are setting up, whilst Manchester is leading in this area Edinburgh is seen as another alternative to London. If you want to set up your business in a busy city with lots of potential clients and lots going on then Edinburgh is the perfect place as it has the busyness of a capital city without costing as much as London.  

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Why Are more Companies Accepting Payment in Bitcoin

The list of companies that accepts bitcoin as an official form of payment is continuing to expand. For those of you who don’t know, bitcoin is a type of cryptocurrency. A cryptocurrency is a form of digital money that people use to buy goods and services. It is a decentralized currency which means that no one person or government has control over it like they do with the dollar or the yen.

A bitcoin is basically a digital file that is stored in a digital wallet, it can be transferred in the same way as normal money and each transaction is recorded digitally. Bitcoin is the most popular and most well-known type of cryptocurrency as it was the first blockchain type of cryptocurrency created back in 2009. After bitcoin became well known many investors invested a lot of money into it making the value of bitcoin spike. The spikes and falls of the value of bitcoin have confused investors as the trends are almost unexplainable, however, even now in 2021, the value of bitcoin is still rising. Bitcoin is now valued at above $20,00 and is increasing in popularity, read on to find out what companies accept payment in bitcoin and why more companies are beginning to accept it.

 

Why it’s good for a company to accept payment in bitcoin.

Generally speaking for any company, the more different forms of payment the more customers they begin to attract as people with have different payment preferences so it’s best to accommodate for as many as possible. The most common payment forms that most companies offer include Visa, Mastercard, and Paypal. It’s good for a company to accept bitcoin as payment as the other methods have higher transaction fees. Mastercard, for example, charges anywhere between 1.55% to 2.6% per transaction and all other credit cards will have similar fees. Cryptocurrencies allow customers to avoid many of the transaction fees that all consumers hate such as overdraft fees and foreign transaction fees. While bitcoin does incur a fee, the fee is considerably lower, usually around 0.5% of any transaction. This is more appealing to consumers so by offering bitcoin as a way of paying a company will gain a competitive advantage over companies similar to them which will help their business to thrive.

 

What companies are accepting bitcoin.

Over the last 6 years, the amount of companies accepting bitcoin has payment has massively increased. The latest survey took place in 2020 and the results showed that 36% of US businesses had started to accept bitcoin as a form of payment. Some major companies that accept bitcoin include Wikipedia, Wikipedia are responsible for the largest ever open-source encyclopedia, they rely on donations to operate and have begun to accept donations in the form of bitcoin via BitPay. Microsoft is another major company that allows its users to pay with bitcoin, they allow you to top up your Microsoft account with bitcoin.

As well as major companies many multinational stores also are starting to accept bitcoin as payment. These include places such as Burger King who in their Venezuelan stores and their German stores accept bitcoin when ordering online for delivery. Also fast-food chain KFC marketed a ‘Bitcoin Bucket’ in their Canada stores and accepted Bitcoin as payment for this. Other companies include Overstock, Subway, Norwegian Air, Miami Dolphins, 4Chan, and Amazon. If you’ve invested in bitcoin and haven’t been spending it, well now you know that you can use it to buy anything from your weekly takeaway to airline tickets you can findbitcoinatm and start spending.

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Reducing Risk In Property Investment

Investing in real estate is a long-term plan, but it doesn’t come without risks. A lot can go wrong and you need to know how to avoid these pitfalls, or alternatively, know how to reduce them. It’s always best to seek expert advice, especially if you’re new to the game, but here are some general tips.

What are the risks?

Any investment is going to come with risks. It’s all about understanding how to reduce them and manage them.

Knowing that investing in real estate comes with its own set of gambles doesn’t mean you should avoid it; while property does carry risk, it’s comparably low compared to other asset classes. One key reason for this is that property is a necessity. This underpins its value and makes it less volatile.

Also, research and good planning can mitigate most of the risks involved.

Vacancy

Australia’s rising population is good for property investors. There seems to be a continual stream of possible tenants to fill vacant properties. If you choose a good property in a high demand area and with good amenities, it’s possible that you will never have to deal with a vacant lot.

However, the possibility of a vacant property is a risk you take. There are plenty of things you can do to mitigate this risk including minor renovations or refurbishments, ensuring your property is pet-friendly or by looking at a wider pool of tenants.

Undesirable tenants

Not every tenant you choose is going to be well behaved and you need to understand this before you start choosing. Some may not treat your property well, some may not pay rent on time, and some may even skip town in an attempt to avoid all costs. Sometimes, it’s impossible to see who these shoddy tenants are. In some cases, even the best tenants may turn purely because of a change in personal circumstances, for example, a loss of employment.

To avoid this, it’s best to have a property manager on hand. Often, a property manager will be able to recognise the unpleasant tenant from the good ones because they have experience in the matter. They’ll advise who to choose and then perform regular checks on the property. It’s also recommended that you get insurance to cover anything unexpected.

Change in circumstances

Risks in investing don’t just revolve around the tenant’s circumstances. You may experience change as well.

What happens if you suddenly fall ill, lose your job or split with your partner? Any of these situations can result in you not being able to afford the mortgage repayments on an investment property.

To avoid this happening, take out insurance on your property and for you. This may seem like an added and unnecessary expense, but it’s always best to be prepared.

Interest rate change

While at the moment the interest rate is great for investors, this may change. And with banks already having to manage the compulsory interest rate change for investors, it’s likely that this will impact investment property portfolios.

Also, as with anything in life, the interest rate will change and it will rise, so it’s important to be prepared. Never over-commit because you’re confident in a current interest rate. Ensure you can pay all repayments, even when the interest rate goes up. Talk to experts about what to expect in the coming years so you can prepare for it.

Consider keeping a financial buffer in place, such as a line of credit or offset account attached to the loan so you are prepared for any financial changes. Also, speak to an expert about the kind of loan you have taken out and whether it’s advisable to change it to a fixed or partially fixed loan.

Unexpected maintenance

It may look bright and shiny now but in a few years time, your property may need a facelift, and over time, there will definitely be some maintenance issues.

This is where a property manager can help out. By inspecting the property regularly, your property manager is a trustworthy source for whether maintenance is necessary, and whether it needs to be more than just a routine fix.

Never ignore maintenance issues, especially if they seem routine and mundane, because they can grow to something bigger.

Make sure you have a financial buffer to cover any expected and unexpected upkeep costs. Appliances need to be changed, walls occasionally need to be painted and bathrooms sometimes leak. Be prepared for these so you don’t run the risk of losing good tenants because you can’t afford to fix something.

Fluctuating housing market

The housing market peaks and dips and this variation is a risk you take when purchasing an investment property. The cyclical nature of the property market is largely dictated by economic factors, consumer sentiment and spending. To control the risk better, choose your property wisely, by considering location, amenities, condition and extra features.

Reducing the risks

There are some key things you can do to mitigate the risks involved in property investment.

Do your homework. Ask the right questions of agents and experts, choose your location wisely, and look at properties carefully before jumping in.

Ask the right questions of agents and experts, choose your location wisely, and look at properties carefully before jumping in. Choose your finance wisely. Purchasing an investment property is just as much about the loan as it is about the property itself. Finding a good loan deal can mean a huge difference to the net return on your investment and can significantly reduce financial risks associated with investing. Having a trustworthy lender behind you also means you can approach them for help when needed.

Purchasing an investment property is just as much about the loan as it is about the property itself. Finding a good loan deal can mean a huge difference to the net return on your investment and can significantly reduce financial risks associated with investing. Having a trustworthy lender behind you also means you can approach them for help when needed. Diversification is key. If you’re going to have a property portfolio, steer clear of choosing one particular area, but rather, look to purchase many types of properties in many locations.

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Ultimate List Of Abc Of Personal Finance Investing And Accounting

Between personal finance, investing, and accounting there are a lot of vocabulary, ratios, and technical terms. If this overwhelms you, then I have a special post for you today. Read on to see the ultimate ABC list for personal finance, investing, and accounting terms.

Quick Side Note:

Obviously, there is so much more than what is on this list, these are ones that I thought would be helpful to share! Also, if you like this post leave a comment and maybe I will do a part 2.

Before We Get Started:

Here are some other popular posts you may be interested in:

A is for Assets

If you are familiar with a company’s balance sheet you likely know the equation Assets = Liabilities + Stockholders’ Equity. But, what is an asset? An asset is something that will provide some sort of future economic benefit to a company. For example, land, inventory, building, cash, they can all be used in some way to generate sales, revenue, or other benefits in the future.

B is for Balance Sheet

As explained before the Balance is one of the 4 crucial financial statements that shows a company’s financial position at one point in time. The balance sheet can also be applied to your own life to understand what assets you have, minus any liabilities, leaving you with your approximate net worth. For example, if you own a $400,000 house and have $15,000 in the bank, but owe $200,000 in mortgage payments your net worth might be considered $215,000. Although, Robert Kiyosaki might argue differently about your house as an asset. Anyone who is familiar with Rich Dad Poor Dad knows what I am talking about!

C is for Current Ratio

One of the most common liquidity ratios when analyzing the financial position is the current ratio. It is calculated as Current Assets/Current Liabilities. Think about it, if you have $100 in short-term assets but owe $200 in short-term liabilities, you are unable to fulfill these payments without drawing down on more debt. This is why many investors want to see a current ratio of at least 1 or even higher for a better margin of safety.

D is for Debt

People are familiar with debt, but it comes in all different forms including student loans and credit cards. Debt provides leverage to companies because the interest expense is tax deductible and it only requires a fixed payment. For example, a $1,000,000 loan with a 5% interest rate requires an interest expense of $50,000 every year, but nothing more. Then, this $50,000 can be written off on the income statement before taxes, thus lowing taxable income and the amount of taxes paid. But, since it is a fixed obligation, even if the company has a rough year they need to figure out how to pay it.

E is for Equity

Equity is the alternative financing method to debt. When you invest in a stock, you are essentially buying equity or a small piece of the company. Equity is one of the popular financings for deals on shark tank. An entrepreneur comes in asking for $500,000 in exchange for 20% of their company. This is implying a valuation of $2,500,000 for the company since 100%/20% = 5 and 5 x $500,000 = $2,500,000. Yes, this is one of my favorite shows and if you want to learn more about it check out this post here:

F is for Forward PE

PE is a measure of Price/Earnings. If a stock is trading at $100 per share with EPS, earnings per share, of $5 this would be a PE of 20. Forward, PE is essentially the same calculation but with projected EPS. This is why sometimes on Yahoo Finance the regular PE won’t be available but the forward be is. This implies negative current EPS, but positive EPS in the future, which allows you to calculate the Forward PE.

G is for Gain

Gain is used for a lot of different reasons. If a company buys land and later sells it for more than the original cost this is called a gain, as long as it is not in the normal course of the business. In other words, if the company exists solely to buy and flip land, this would more than likely just be considered revenue. But, if a technology buys land for their office building but decides to relocate and sells the land for more, this would appear on the income statement as a gain. Gain is also what investors use to talk about their stocks market performance, usually in percentage or dollar terms.

H is for Hold

When reading analyst reports you will usually see variations of 3 different opinions, buy, sell, and hold. Buy and sell opinions are easy to understand and hold falls in the middle of the spectrum. It is a suggestion that if you do not currently own the stock, hold off on buying. But also, if you are a stockholder, it does not mean sell, just hold. Basically, do not initiate a transaction either way.

I is for Institutional Investor

People like you and me are considered retail investors, but companies with billions of dollars to invest are institutional investors. This can include hedge funds, financial service companies, higher education, companies investing pensions on behalf of their employees, mutual funds, and other similar investors.

J is for Junk Bonds

When it comes to bonds there are two classes of junk bonds and investment grade. The classification depends on their credit rating. The lower the rating, the higher the chance the bond will default and not make the payments. However, a lower rating means a higher potential yield, making these bonds much riskier. Typically below a BBB rating is considered junk bond territory.

K is for Kangaroos

This was actually one I was unfamiliar with and I had to do some research to find a K term. Supposedly, kangaroos are the slang name for Australian shares that are traded on the Australian Stock Exchange which is called All-Ordinaries Stock Exchange. I learned this from Investopedia so check out their article here.

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